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Preserving Pharmaceutical Progress, Part 2

Recently, DrRich offered for your consideration a brilliant proposal that would assure at least some continued advances in pharmaceutical therapy, while at the same time providing for drug price controls.

DrRich was gratified to find that the majority of comments and e-mails he received regarding this proposal were quite complimentary. Sure, there were the obligatory cavils that the drug companies deserve what they’re getting (the essential evil nature of drug companies was, of course, a point that DrRich cheerfully conceded from the outset), and that certain interest groups (breast cancer, AIDS, etc.) even with government price controls would continue funding research aimed at treating certain specific illnesses (a prospect which ignores that translating the kind of basic research done by, say, the NIH into actual useful products requires specific companies to risk hundreds of millions of dollars in product development; see here), but on average the response to DrRich’s proposal was most favorable.

That proposal can be summarized as follows. Each American would formally elect to participate or not in a voluntary plan of price controls. Those who elected to participate would be entitled to receive any legal prescription drug at low prices set by a sympathetic government board, as long as the drug had been on the market for some fixed amount of time. (DrRich arbitrarily suggested five years, but that number could just as easily be set at 10 years, or any other value.) Those who choose not to participate in the price control plan would have to pay whatever the drug companies wished to charge them for all their prescription drugs – but they would be eligible to receive new prescription drugs immediately upon FDA approval (that is, the five- or 10-year waiting period would not apply to them). Finally, individuals would be able to change their status (from participant to non-participant, and vice-versa) only every two years.

Just as is the case with the drug price controls currently under consideration by the Obama administration, DrRich’s plan would achieve low drug prices for anyone who elected to participate. But DrRich’s plan offers, in addition and in distinction, a mechanism by which pharmaceutical progress could continue, albeit at a slower pace than we see today. That is, it provides a population of individuals willing to pay full price for new drugs, thanks to whom the drug companies will be induced to continue spending on drug development.

As a result, even those who choose to participate in DrRich’s price control plan would be able to count on a pipeline of new drugs, which would become available to them at very low prices after the mandated five- or 10-year delay. This is a very useful feature that would not be available under Mr. Obama’s price controls. Indeed, participants in DrRich’s plan would be placing themselves in a situation reminiscent of that experienced by Canadians today. (Canadians, of course, can rely on a steady stream of new, cheap drugs which come to them, with some delay, thanks to a population of individuals south of their border who are paying full freight for those same drugs.)

All we need now is to launch a grassroots movement to convince our legislators that this proposal offers all the benefits of the drug price controls now under consideration by the Obama administration, without its major drawback (i.e., a complete stifling of pharmaceutical progress).  Then, having done that, we will simply need to set up the federal bureaucracy to establish and administer the participation status of every American, and a government board that will set the official prices of all prescription drugs.  With the kind of streamlining in federal processes and procedures promised by the Obama administration, we should be able to implement DrRich’s plan in a matter of just a few years.

The Punch Line

There is, of course, a punch line.

Now that you have had ample time to digest the favorable implications of DrRich’s proposal, and can plainly see the wisdom behind it, you will be delighted to know that you don’t actually have to wait for federal legislation and the establishment of a vast new price-control bureaucracy in order to participate. You can participate today, right now, with nobody’s acquiescence but your own.

Here’s how. Simply declare to yourself that DrRich’s system is already in place, and that you are a participant, and that the only drugs available to you are the ones that have already been on the market five or 10 years or longer. (You can choose your own personal waiting period.) When you see your doctor, insist – demand – that he/she prescribe only older drugs. The price of most of these drugs will be set not by a government panel, but by WalMart (which for many common generic drugs has set a co-pay of $4).  By declaring yourself as boycotting the brand new drugs that are being sold (unfairly, of course) at the highest premium, your personal drug costs will be remarkably reduced – just as if federal price controls were really in place.

Furthermore, since currently there really aren’t federally-mandated price controls, drug companies are not yet constrained from investing in new drugs. As long as this situation continues, there will be a steady stream of new drugs exiting that magic five- or 10-year boycott period you have set for yourself, and thus becoming available to you under your personal, voluntary price control plan.

And best of all, if you were suddenly to develop a medical condition that clearly calls for one of the brand new drugs, one that wouldn’t be available to you, either temporarily under DrRich’s Voluntary Price Control System, or ever under a government-mandated price control system (because under the government plan the drug never would have been developed in the first place), you won’t need to wait five or 10 years (or forever) to get that drug. Since you are really only “pretending” there are drug price controls, the moment you decide that a system of price controls is no longer accruing to your own personal benefit, you can simply ask your doctor to write you a prescription.

So: those clamoring for government price controls on drugs can have them today – this very afternoon. They can experience every aspect of price controls (both low prices and the unavailability of new drugs) in a way that places them in no worse a position (indeed, in a far better position) than if government price controls were actually in place, and without reducing the options for everyone else.

Indeed, considering the above, the only way it would make sense to continue demanding mandatory price controls would be if something other than reducing drug prices were the chief motivating aim.

DrRich leaves it as an exercise for his regular readers to determine what that motivating aim could possibly be.

**This blog post was originally published at Dr. Rich’s Covert Rationing Blog.**

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